S&P 500 Faces 10% Correction as Fed Rate Hikes Loom

The S&P 500 index has dropped nearly 1% in September so far, historically its weakest month. This decline is attributed to concerns over elevated energy costs and recent inflation data that has driven US 10-year Treasury yields above 5% for the first time since 2023.

Traders expect a quarter point rate hike by Fed Chairman Kevin Warsh on Wednesday, with odds now at nearly 100%, up from about 60% a week ago. This potential tightening cycle is expected to hurt corporate margins and negatively impact profit outlooks.

Macro Risk Advisors LLC strategist believes that this could lead to a correction in the S&P 500 of around 10%. The Federal Reserve's rate hikes starting this week have sparked market concerns and triggered a reaction from traders.